China To The Rescue

The momentum in today’s trading session has shifted back towards the Euro, on the back of China’s pledge to support the Eurozone in tackling the debt crisis. Meanwhile, European finance ministers have cancelled their meeting due today, citing tepid response to the required austerity measures. However, reports suggest that Greek conservative party leader, Antonis Samaras, may commit to demands from the Troika later today. Following yesterday’s easing inflation data in the UK, all eyes are now set on the BoE’s quarterly inflation report due later today. Data just released indicates that jobless claims rose more-than-expected for January.

Pound Sterling – UK Markets

Sterling has moved lower against the Euro this morning, following the Chinese vow to support the Eurozone in emerging out of the sovereign debt crisis. Additionally, yesterday’s warning from Moody’s that it may cut Britain’s “AAA” rating has not helped matters. Meanwhile, following yesterday’s in line consumer price inflation report, markets are keenly awaiting the BoE’s quarterly inflation report due today, which is likely to reveal the bank’s latest growth and price estimates, along with further hints on monetary policy. Mervyn King’s press conference, following the release, will also be closely watched. Data just released indicates that unemployment has risen to 8.4%, which is also placing the pound under pressure. Yesterday’s housing data revealed a mixed picture, with the RICS report indicating a decline in house prices, while DCLG reported the first rise in house prices in nine months.

US Dollar – US Markets

The sudden spark of optimism following China’s offer to help Europe has put pressure on the US Dollar against the Euro this morning. Additionally, growing optimism that Greece will receive its next tranche of aid shortly has prompted traders to shun safe haven currencies. Yesterday, retail sales in the US came in below expectation, though ex-auto sales were better than anticipated. Meanwhile, the Federal Reserve Bank of Philadelphia President, Charles Plosser, opined that inflation is not an "imminent threat", but added that he does not see a case for further easing. The resilience in the US manufacturing sector is expected to continue, with industrial production for January, due today, anticipated to indicate acceleration in growth. Additionally, the New York Fed manufacturing index is expected to reveal an improvement for February. The minutes of the last FOMC meeting are awaited for cues on the economic landscape and the central bank’s take on monetary policy.

Euro – European Markets

The Euro has strengthened against the Pound and the US Dollar, after the People’s Bank of China Governor, Zhou Xiaochuan, indicated that China could assist Eurozone nations to combat its debt crisis. Moreover, reports indicating that the Greek conservative party leader, Antonis Samaras, is willing to provide a written commitment to the Troika today to stand by austerity measures after elections likely in April or May, eased concerns over Greece. However, Eurozone finance ministers cancelled a meeting in Brussels due today and are now expected to hold a teleconference to discuss problems surrounding Greece. Meanwhile, growth concerns in the Eurozone abated, after data indicated a lower than expected contraction in the German GDP and an unexpected expansion in the French GDP for the fourth quarter.

Other Currencies – Highlights

The Aussie Dollar has climbed against the US Dollar amid expectations of improving fundamentals, after data from Westpac Banking Corporation earlier today indicated that Australian consumer confidence for February climbed to the highest level since November 2011. Additionally, a rebound in new motor vehicle sales and improvement in business confidence for January, has further aided the trading sentiment towards the Aussie. Fading concerns over the Greek debt situation, coupled with a Chinese promise of support to the Eurozone, has further provided the necessary boost to the Australian Dollar. Markets are expected to closely monitor tomorrow’s Australian unemployment data, which is expected to register an uptick for January.